Making China happy? Then you're a success

Foreigners looking to crack the China market have often thought more about
what the country's cheap labour force and billion-strong customer base can
do for them, rather than what their businesses can do for China.

'Social responsibility isn't part of your business strategy for China, it is your business strategy'Photo: Getty Images

This was perhaps always a short-sighted strategy, but as China's 12th Five-Year Plan for the first time incorporates a chapter on enhancing "social governance", it is now clearer than ever that a "me first" approach to doing business in China is no longer enough.

From helping to cleaning up the environment, to improving public health, from broadening access to computers and helping poor children get to university, businesses large and small in China are now explicitly being asked to "do their bit".

At the British School of Beijing – an eye-wateringly expensive establishment run for expats and China's privileged foreign-passport holding elite – an example of this pressing new reality could be seen unfolding on the stage of the school's theatre one morning earlier this summer.

As a group of teachers from some of China's poorest rural counties looked on, the school's headteacher, Mike Embley, jumped up on stage and began a "jam session" with his head pupil, the pair thrashing the life out of two drum kits.

The Chinese teachers – who had come to learn '"creative" teaching methods at a school with facilities of which they could only dream – looked on utterly baffled, but smiled broadly, their eyes lighting up at the sudden vista of an altogether different educational universe.

The project, which this year will give 100 rural Chinese teachers the opportunity to absorb new teaching methods, is part of the school's community outreach but also, from the perspective of its Staffordshire-based owners Nord Anglia, part of its corporate social responsibility (CSR).

"I think everyone knows that connections are important in China," says Mr Embley. "Schemes like this work for everyone. My Chinese staff want to participate to help their country, the government wants teachers to learn how to teach more creatively and we also know that we need support of the government to do our business. Everyone benefits."

Many successful foreign companies in China have long-established CSR programmes, but at a time when China's ruling Communist Party is faced with a growing wealth gap, disgruntled farmers and an education and healthcare system that is falling short of rising public expectations, they have never been so vital to success.

China's premier, Wen Jiabao, made the expectation explicit this year when he urged property developers who have grown massively rich through China's real estate boom to be socially responsible, adding that he believed that "the blood flowing in their bodies should be moral, too".

At a local level Chinese officials are now judged on their ability to deliver not just GDP growth, but also "happiness" to the people they serve, maintaining social harmony.

It stands to reason that businesses that help them hit those social targets are the ones likely to get on, says Clare Pearson, a lawyer specialising in corporate social responsibility who also edits The Charitarian magazine.

"Social responsibility isn't part of your business strategy for China, it is your business strategy," she says.

Smart companies have been doing charity work in China for many years, but the difference now, say analysts, is that bringing money and technology is no longer, in itself, enough to open doors and make sure that all those licenses, permits and regulatory approvals receive the all-important "chop", or stamp of government officialdom.

"Doing CSR is not new, but the Chinese government's renewed emphasis on stability and good governance is clearly going to have a major impact on foreign businesses," says Dirk Moens, the head of the EU Chamber of Commerce in China.

"We are now seeing that the workforce is now more outspoken and more demanding, and China's government is clearly looking for help in managing that potential instability, and EU businesses with their experience in managing labour relations are well placed for this."

That perhaps explains why so many of the CSR slogans adopted by big business in China sound like they could have been dreamed up by the Communist Party's own propaganda department. "Live Positively", says Coca-Cola's current campaign; "Here for Good", proclaims Standard Chartered bank; "Change their Destiny", urges Kappa, a leading sporting goods brand.

Chinese companies, who instinctively understand the strong link between business and government in China, are consistently outperforming their foreign rivals when it comes to CSR, according to research by R3, a Beijing-based marketing consultancy.

In a 2011 survey of which companies Chinese consumers felt did most to help society, only two global brands – Coca-Cola and Nokia - made the top 10, taking 8th an 9th places respectively. Leading the way were telecoms giant China Mobile, white goods maker Haier and personal computer brand Lenovo.

"The Chinese government has made some important commitments within each of their Five-Year Plans with regards to community outreach, closing the digital divide, and building greater racial harmony," the R3 report on CSR in China concluded.

"Companies who develop plans that reflect and enhance these initiatives, such as Lenovo's 1,000 County Drive, Unilever's Rainbow plan, Li Ning's Sail class project, will all produce better results."

So with the pressure now on for officials to deliver socially, the opportunities for corporate charity have never been so great - or the price of failure so high - according to Ms Pearson.

"Take the Sichuan earthquake in 2008 as an example," she recalls. "In the weeks after the quake in Sichuan I saw colleagues remove soft drinks from the fridge made by a company who had not yet 'committed to the quake' and replace the cans with a brand that had donated its annual year's profits to earthquake victims.

"Share prices were affected and the Chinese are patriotic purchasers. Foreign companies are going to have see the bigger picture to remain in the frame in developing markets."

Put more crudely – and more cynically - in a world where Chinese officials are now being graded for promotion on their achievements in enhancing social welfare, building "guanxi" is no longer just about paying a bribe or finding the right joint-venture partner.

"You could say that we've moved on to a different level now in China," a Chinese government official told a closed-door meeting of British business heads this year, "paying bribes was the old way, but now we're in China 2.0. Helping a government official meet his social target is what brings him promotion, so anything that helps him do that, is a means to an end."